Simpler ways of going about it are indeed possible and are discussed in detail in the article; a simple regular leasing of land accomplishes all the benefits of an LVT without any of the more complicated bits.
Also -- you can just make a game where land isn't fundamentally scarce, that's an even simpler option too.
> I'm not entirely sure how this makes much sense if one can't generate any revenue from land and lots are limited to a single tenant - which seems to be the norm.
It's important to remember that just because something doesn't generate "monetary" income, doesn't mean it isn't providing value, and players will pay for value -- either in "hard" currencies like real money or in-game gold, or "soft" currencies like time, effort, and putting up with pain-in-the-butt. Housing in MMOs is typically a vanity item, but consider that social status, vanity, and the like are real genuine utility for human beings.
> If the land can't really be used any more efficiently, outside of repossessing unused plots owned by absentee players, then all this does is ensure the wealthiest players are the only ones who can afford the most in-demand lots (assuming the valuation varies).
If something can't be used any more efficiently (which suggests that it either is already being put to its highest and best use already, or that its potential use is severely restricted, akin to real-world municipal zoning restrictions), then there are several ways to look at that:
1. This is fine, actually; the asset is actually being used for its intended purpose and not simply hoarded
2. The developers could remove restrictions on the use of the thing so that there is a higher and better use for it than currently exists
3. The developers might reconsider their underlying assumptions for making the asset scarce in the first place
Did you have a concrete example of this scenario? That might make it easier to discuss if you provided an illustration from a particular game (or one you could imagine).